7. One potential cost of anticipated and balanced inflation is: a. the lost resources devoted to the management of money. b. the loss of employment required to raise the inflation rate for political reasons. c. the excessive inflation of real estate prices. d. a reduction in the flow of imports into the country. e. none of the above 8. Two common features associated with most hyperinflations are: a. a decline in the real demand for money and a decrease in the stability of relative prices. b. an increase in the real demand for money and a decrease in the stability of relative prices. c. a decline in the real demand for money and anincrease in the stability of relative prices. d. an increase in the real demand for money and anincrease in the stability of relative prices. e. an increase in the overall savings rate

7. One potential cost of anticipated and balanced inflation is: a. the lost resources devoted to the management of money. b. the loss of employment required to raise the inflation rate for political reasons. c. the excessive inflation of real estate prices. d. a reduction in the flow of imports into the country. e. none of the above 8. Two common features associated with most hyperinflations are: a. a decline in the real demand for money and a decrease in the stability of relative prices. b. an increase in the real demand for money and a decrease in the stability of relative prices. c. a decline in the real demand for money and anincrease in the stability of relative prices. d. an increase in the real demand for money and anincrease in the stability of relative prices. e. an increase in the overall savings rate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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the money supply of Freedonia this year is $150 billion nominal GDP is $750 billion .assuming that velocity of money is stable. real GDP gross 2%this year. and money supply does not change what are the velocity, price level, and inflation rate
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Suppose that the central bank has the policy "set R equal to 3 if inflation equals 2% and GAP = 0. Raise R by 0.5 points for every point of inflation above 2%. Reduce R by 0.5 points for every point that inflation falls shortof 2%. Increase R by 1 point for every percentage point of GAP, if GAP > 0. Reduce R by 1 point for every percentage point of GAP, if GAP < 0." All but one of the following is an equation that is consistent with this rule. Which is the exception? OR-3+0.5( - 2) + GAP OF-2+1.5n + GAP OF- 3+0.5(n - 2) + GAP + n R-2+n+ GAP
Suppose the nominal interest rate on savings accounts is 12% per year, and both actual and expected inflation are equal to 5%. Complete the first row of the table by filling in the expected real interest rate and the actual real interest rate before any change in the money supply. Time Period Before increase in MS Immediately after increase in MS Nominal Interest Rate (Percent) 12 12 Expected Inflation (Percent) 5 5 The unanticipated change in inflation arbitrarily benefits Actual Inflation (Percent) 5 10 Expected Real Interest Rate (Percent) Actual Real Interest Rate (Percent) Now suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 5% to 10% per year. Complete the second row of the table by filling in the expected and actual real interest rates on savings accounts immediately after the increase in the money supply (MS). Now consider the long-run impact of the change in money growth and inflation. According to…
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In this Decision Point you learned a little about inflation and inflation expectations. Apply what you learned from this decision point to the following questions. Erica makes $25 per hour. Erica receives a 1.9%1.9% raise and inflation is 2.5%2.5% what happens to her real wage? Her real wage: rises by 1.9%1.9% rises by 2.5%2.5% falls by 0.6%0.6%. does not change.
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